* OPEC and allies meet next week
* Brent and WTI still set for monthly gains
* Dollar set for biggest monthly rise since July (Updates prices, adds Iraq details, N. Sea supply)
LONDON, Nov 29 (Reuters) - Oil prices dipped on Friday in muted activity because of the U.S. Thanksgiving holiday while OPEC watchers expect an extension to a pact to throttle oil output beyond March but no deeper cuts to be decided by the producer group and its allies.
Brent crude futures were down 39 cents at $63.48 a barrel by 1303 GMT, heading for their biggest monthly gain since April with a rise of about 5.4%.
West Texas Intermediate (WTI) futures were down 4 cents at $58.07, tracing back earlier losses and on course for a fourth consecutive weekly increase. On a monthly basis, WTI is poised for a jump of about 7.1%, its highest since June.
The dollar is poised to register its strongest month since July, making it more expense to buy oil.
Next week's meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, is also on investors' radar.
"We don't get any strong bullish impulses for the OPEC meeting. They will continue the cuts and focus on compliance," said SEB chief commodities analyst Bjarne Schieldrop.
"We don't see that they really need to cut more," he added, pointing to forecast oversupply being counteracted by lower demand because of incoming regulations cutting marine use of high-sulfur crude.
The producer group has agreed to cut output by 1.2 million barrels per day through to March as U.S. output continues to climb to record levels.
Russian oil companies on Thursday proposed to keep their output quotas unchanged, putting pressure on OPEC+ to avoid any major shift at the meeting over Dec. 5-6.
The gathering coincides with the planned announcement of the final pricing for oil giant Saudi Aramco's initial public offering.
In OPEC member Iraq, Prime Minister Adel Abdul Mahdi said on Friday he would offer his resignation to parliament to allow lawmakers to choose a new government, in a move that follows weeks of violent anti-government protests.
Oil prices were pressured by China's warning to the United States on Thursday that it would take "firm countermeasures" in response to U.S. legislation backing anti-government protesters in Hong Kong.
Oil supply from the North Sea, where crude differentials have been hitting several year highs, is set to increase in January, sending a bearish signal.
A Reuters poll of 42 economists and analysts forecast Brent to average $62.50 a barrel next year, little changed from last month's $62.38 outlook, which was the lowest prediction for 2020 in about two years.
The benchmark has averaged about $64 per barrel so far this year.
(Additional reporting by Aaron Sheldrick in Tokyo Editing by David Goodman and Louise Heavens)